MADHU LAKHIRAM SHARMA ,MUMBAI vs. ITO WARD 16(3), MUMBAI

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ITA 2506/MUM/2025Status: DisposedITAT Mumbai16 July 2025AY 2017-18Bench: SHRI ANIKESH BANERJEE (Judicial Member), SMT. RENU JAUHRI (Accountant Member)1 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the notice for reassessment under Section 148 was issued beyond the permissible three-year period from the end of the relevant assessment year, and the escaped income was below Rs. 50 lakhs. Therefore, the reassessment proceedings were void ab initio.

What were the facts?

The assessee filed a return declaring a loss for AY 2017-18. The AO added Rs. 28,63,000/- to the assessee's income under Section 56(2)(vii)(b) of the Act, considering it as escaped income. This addition was upheld by the CIT(A).

What were the issues?

Whether the reassessment proceedings initiated under Section 148 of the Income Tax Act were valid, given that the notice was issued beyond three years from the end of the assessment year and the escaped income was below Rs. 50 lakhs.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 151,Section 56(2)(vii)(b),Section 50C,Section 250

AI-generated summary — verify with the full judgment below

Before: SHRI ANIKESH BANERJEE & SMT. RENU JAUHRI

For Respondent: Shri Bhagirath Ramawat, Sr. DR
Hearing: 10.07.2025Pronounced: 16.07.2025

स िवाई की िारीख / Date of Hearing 10.07.2025 घोर्णा की िारीख/Date of Pronouncement 16.07.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/ National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as CIT(A)] dated 27.02.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2017-18.

2.

The assessee has raised the following grounds of appeal:

1. The Ld. AO is erred in adding a sum of Rs. 28,63,000/- U/s. 56(2)(vii)(b) of the Act. As well as the Ld. CIT(A) is also erred in upholding the aforesaid addition without appreciating the fact that the valuer’s report was provided before the Ld. AO at the Madhu Lakhiram Sharma AY: 2017-18 time of assessment proceedings and also before the Ld. CIT(A), who in turn, dismissed the appeal without referring the same to the Government approved valuer.

2. The Ld. CIT(A) is erred in upholding the addition without appreciating the legal stand that, the notice under section 147 cannot be issued beyond 3 (Three) years, if escapement is below Rs. 50 lakhs.

3.

The Ld. AO/Ld. CIT(A) is also erred is upholding the addition without giving opportunity to the assessee to respond to notice under section 148A of the Act.

4.

The appellant request to delete the addition confirmed by the CIT(A).”

5. The appellant craves to add, alter or omit any or all of the above grounds of appeal

before or at the time of hearing of the appeal.”

3. The assessee has subsequently taken the following additional ground: “6. The proceeding of re-assessment, completed u/s. 147 vide order dated 26.04.2023, is being void ab initio for the want of the jurisdiction in view of gross violation of Section 147, 148 and 151 of the Act, to be precise; (a) as reopening notice issued, in the 4th year from the end of relevant assessment year u/s. 148 respectively vide dated 08.04.2021 and 28.07.2022 being approved by the Range 8(1), Mumbai and PCIT-8, Mumbai which are not the specified authority u/s. 151 (ii) to give approval to invoke Section 148 of the Act.”

4. Brief facts are that the assessee filed return declaring total loss of Rs. 3,08,468/- for AY 2017-18 on 23.03.2018. As per the information received by the Ld. AO, the assessee had entered into an immovable property transaction for a total value of Rs. 60 lacs whereas the stamp duty valuation of the property was Rs. 88,63,000/-. Observing that the provisions of Section 50C are applicable with regard to difference of Rs. 28,63,000/-, Ld. AO held that income chargeable to tax u/s. 56(2)(vii) of the Act had escaped assessment and accordingly a notice u/s. 148 of the Act was issued. Assessment was completed after adding Rs. 28,63,000/- to the assessee’s income u/s. 56(2)(vii)(b) of the Act. Aggrieved with the order of Ld. AO the assessee preferred an appeal before Ld. CIT(A). Vide order dated 27.02.2025, Ld. CIT(A) dismissed the assessee’s appeal after holding that the addition has been rightly made in line with the Madhu Lakhiram Sharma AY: 2017-18 statutory provisions. Aggrieved with order of Ld. CIT(A), the assessee has filed an appeal before the Tribunal. Besides challenging the addition on merits, the assessee has raised legal grounds regarding reopening of the assessment.

5.

At the outset, Ld. AR submitted that the proceedings u/s. 148 of the Act were void ab-initio for want of jurisdiction. It has been pointed out that notice u/s. 148 of the Act, was issued on 08.04.2021 i.e. after the expiry of three years from the end of relevant assessment year i.e. AY 2017-18. As per applicable provisions, no notice can be issued after three years unless the income chargeable to tax which has escaped assessment amounts to Rs. 50 lacs or more. In this case, the amount involved is only Rs. 28,63,000/- and therefore the assessment could not have been reopened after the expiry of three years from the end of the assessment year.

6.

We have heard the rival submissions and carefully considered the applicable provisions for reopening of assessment. Admittedly, the income escaping assessment is below Rs. 50 lacs and therefore in view of the amended provisions applicable with effect from 01.04.2021, the assessment could not be reopened as three years had elapsed from the end of the relevant assessment year. In view of clear legal position, we hold that the reopening was bad in law and therefore proceedings initiated vide notice u/s. 148 of the Act are hereby quashed.

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